* Ratio: You'll probably notice a significant difference in price
of the stock, traded as an ADR and on its home exchange. You can easily
calculate an over- or undervaluation (and, of course, a fair valuation). All
you need is the ratio of ADR to stock, as listed in the table above, and the
exchange rate of the US-Dollar to this country's currency. The following,
generalized example explains how to calculate.
On June 26, 1998, the Swiss ADR Sulzer Medica, with a ratio of 10:1,
was priced USD 24 7/8. In Zurich, its home exchange, Sulzer traded at 379 Swiss
Francs. The Dollar/Franc - Exchange rate was 1.526 (1 Dollar buys 1.526 Swiss
Francs). Now we can calculate: Multiply the price in Dollar with the ratio
(10): 24 7/8 x 10=USD 248.75. With other words, ten ADR's equal one share of
Sulzer Medica and will cost you $248.75 (excluding transaction costs). Now you
multiply this Dollar-amount with the exchange rate: $248.75 x 1.526=SFR 379.59.
The ADR has been valued fair. The Bank of
New York offers free software, which does all the calculation.